Cosmetics profits slump adding to Japanese economic troubles

Falling profits in the cosmetics sector amongst other industries, are said to be threatening to weigh on Japanese investment and wages, adding to the likelihood of recession.

According to Bloomberg News, Japan's GDP shrank by 3.5 percent in the last three months leading up to September, the steepest decline since the earthquake-affected first quarter of 2011.

Ripple effect

In light of these findings, Shiseido, Japan’s largest cosmetics maker announced it was going to be cutting costs in the next two financial years and limiting hiring after its net income fell by 45 percent in the last six months of the quarter.

It was only last year that the global giant held position of market leader for its skin care products, despite a two per cent decline in its sales compared to the previous year.

Elsewhere, Panasonic’s cosmetic arm (beauty grooming devices) also posted losses, announcing it was to cut jobs and close some production lines in a bid to return to profitability.

Cosmetic products are generally considered resistant to downturns but it appears that Japanese consumers have consistently been cutting back on spending, and shifting towards more low-cost products.

Meanwhile, Bloombery further highlighted attributing factors to the shrinking economy as those of tumbling exports and a decline in consumer spending, which it says has in return put pressure on the central bank to add stimulus.

“Japanese exports in the first 20 days of October were down 5.1 percent from a year earlier, while capital spending probably dropped 1.7 percent in the third quarter -the biggest fall since 2009.”

Not much better than last year…

Last Year, it was market researcher Euromonitor, that revealed the beauty and personal care market in Japan to be suffering since the country’s economy hit a recession in 2008.

Then, the analyst highlighted price-sensitivity and a shift towards mass products caused by job insecurity and gloomy economic outlook as the main culprits for the stalled sales.

"The fact that Japanese consumers are being more selective when making purchases is likely to drive major manufacturers to launch brands and products targeting mass consumers, this in turn will intensify competition in mass skin care," Euromonitor had explained.

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